Staples Inc. Buy Signal

The last month has been pretty awful for retailers’ shares, with continued high unemployment, fragile consumer confidence, and growing concern that the economic expansion is running out of steam.  However, I see this as an opportunity to purchase an undervalued stock that could be ready to bounce.

Now before we get too ahead of ourselves let’s take a quick look at the sector’s recent behavior. Simply put, office suppliers have suffered since the recession.  This is probably due to consumers and small-businesses holding back on spending for everything from paper to printer cartridges. The economy and a weak white-collar job outlook continue to weigh heavily upon sales growth.  Also, the shares of OfficeMax and Office Depot have recently risen a bit on rumors of a merger.  For perspective, Staples is more than six times bigger than OfficeMax and Office Depot combined, by market capitalization.

So why do I think Staples is primed for an upswing?  Well, for one, they’re venturing into new markets by more actively selling cellphones.  This is

Also, CAPS member MikeBobulinski recently stated that Staples is feeling competitive pressures from all sides but ought to be able to rise above the rest: “Looking for the bounce…again, a company puts a realistic view in their guidance, and gets hammered for it. Staples might be pressured in the long haul as their business sees competition from everyone, Amazon to Walmart…but they will bounce back when the latest panic on the street subsides.”

Finally, by analyzing the SwamiCharts below one can easily notice the technical buy signals emerging.  The volume drying up (darker blue shown in the “Volume” indicator) after a decrease in prices could be read as a lessening of sellers.  Also, the recent blue “valley” signal from the middle SwingWave indicator suggests a possible upward continuation in a similar vein of the green buy signal illustrated by the bottom Predict indicator.

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